However, the upturn is not one-sided. In the Shanghai Composite (SHCOMP), financials led the gains, although brokerage counters remained under pressure due to ongoing investigations over alleged rule violations. On the other end, industrials and energy equities dragged on the index, with infrastructure-related shares on the defensive.

The global energy complex stays gloomy as most do not expect any major changes to production at the OPEC meeting this Friday, which contributed to the downward pressure on energy equities.

Of course, there is also the possibility that the government ‘national team’ could have lent a hand to stabilise the markets, after SHCOMP dropped as much as -3.2% at midday, adding to the -5.4% incurred last week.

Perhaps Guotai Junan’s statement that they will continue to support the equity markets, despite the CSRC reversing the rule that large brokerages need to maintain a net long position as long as the SHCOMP stays below 4500, convinced investors that the sharp declines last Friday and earlier today may be good for bargain hunting.

Whatever the reasons, I’m not convinced that the rebound today is indicative that Friday’s selloff is over. We saw that the PBOC set another higher USD/CNY fixing today, reinforcing my view that the Chinese are mitigating the risk that the markets may sell the CNY once the IMF includes the currency into the SDR basket.

Further yuan devaluation features highly as a clear downside risk to not just Chinese equities but also global stocks, as we have learnt from the unexpected August’s move to depreciate the CNY. Overall, the week is chock-full of risk events, which could make traders sit up. Market volatility may be poised to head higher, although for China, it is usually the domestic factors driving the stock markets than external forces.

Meanwhile, euro selling ahead of the ECB meeting was sustained in Asia, which kept the dollar index above the key 100 mark. Economists have unanimously expected that ECB will unveil more stimulus this Thursday as president Draghi has been priming the markets for more action since October.

The risk has shifted to whether the markets may be disappointed by the amount of additional stimulus. EUR/USD is trading below 1.06, and the market disappointment may have led to a rebound in the single unit currency.

Singapore

The strong 2850 support in the STI managed to hold off downside pressure at the start of the week, helped by gains in the three Singaporean banks and Singtel. These four counters accounted for nearly half of the weightage in the 30-stock index. As such, the STI treaded in mild gains through most of the session, going as high as 2877.53 from Friday’s close of 2859.12.

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